The age of choice: developing countries in the new aid landscape

Over the last decade the aid landscape has changed dramatically. In 2000, development assistance was overwhelmingly provided by traditional donors. Today, this is being complemented by the growth of other forms of funding, including from non-DAC donors (such as China and Brazil), climate finance funds, social impact investors, philanthropists and global funds, as well as less concessional flows.

The study explores the challenges and opportunities that this new landscape, and the new ‘age of choice’, presents to developing countries. It does this in three ways. First, it provides a provisional taxonomy of the various forms of development assistance, including the newer or ‘less traditional’ flows. Second, it uses this taxonomy to provide a first-cut estimate of the volume, composition and recent trends in development assistance. Third, it summarises the findings of three country case studies in Cambodia, Ethiopia and Zambia, which seek to understand the volume and composition of flows at country level and the priorities that governments have in managing them. Two of the case studies are published as background papers for the synthesis report; the Zambia study will be published shortly.

The study finds that:

The volume of development assistance has grown dramatically since 2000, and the composition has changed significantly, with a much larger share being accounted for by so-called ‘non-traditional providers’. Even according to our most conservative estimates, total development assistance grew from $64.8bn to $173.3bn between 2000 and 2009. In 2000, the ‘non-traditional’ component of these flows was only $5.3 billion, or 8.1% of the total. By 2009, non-traditional flows had increased tenfold to $53.3 billion, making up 30.7% of total development assistance.

Countries are welcoming this additional choice and see these trends as more positive than negative. The benefits of greater choice were found to outweigh the potential costs of the additional fragmentation.

The growth in the variety of providers of development assistance, particularly the non-traditional, is helping strengthen the negotiating power of governments, and may make it more difficult for traditional donors to influence policy.

The ability of countries to benefit from the changed landscape depends heavily on their ability and willingness to manage these flows strategically, and also on their economic and political context.

The changed landscape will lead to different ‘ways of working’ for governments, traditional donors and the international aid effectiveness community.